Audit finds problems in Kansas Department of Commerce handling of economic development programs

Topeka  A state audit released Wednesday found numerous problems in the Kansas Department of Commerce’s handling of major economic development programs, including exceeding the statutory cap on tax incentives by $1.5 million in the past fiscal year.

The audit also found that the Department of Commerce has made commitments exceeding that legal cap by $22.5 million over the next 10 years.

Republicans on the Legislative Post Audit Committee defended the administration, saying it is doing a good job using the economic development programs to develop jobs.

Sen. Julia Lynn, R-Olathe, said that while the Commerce Department may have fallen behind on providing reports on the programs, the department was luring companies to Kansas, and that’s what is important.

“I question whether we’re looking at the right things,” Lynn said.

The audit said assessing the benefits of the program called Promoting Employment Across Kansas, or PEAK, was “difficult because the Department of Commerce has not completed meaningful information on the program.”

The audit said data for the program were incomplete and had inaccuracies.

Commerce was more than one year behind in reporting PEAK outcomes to the Legislature, and the Kansas Department of Revenue’s tax incentive information was incomplete, the audit said.

In his response, however, Commerce Secretary Pat George said that the agency “has the ability to create several types of PEAK reports and has prepared between 30 and 40 reports showing program level data.”

PEAK allows companies to retain employees’ state withholding taxes in exchange for creating new jobs or retaining existing jobs.

The audit said Commerce had exceeded the statutory cap intended to limit the growth of PEAK. The Legislature capped the program at $6 million but Commerce had authorized $7.5 million in the last fiscal year.

Rep. Marvin Kleeb, R-Overland Park, said the $6 million cap was unintended and subject to interpretation. And George said the agency would seek legislation to allow it to provide the higher spending.

The audit said PEAK “on the best information that we could compile” generated 5,200 jobs in exchange for $21 million in forgone withholding taxes through December 2012.

The audit also looked at the High Performance Incentive Program, or HPIP, which provides sales tax exemptions and tax credits for certain companies that make capital investments and train their workforce.

Participating HPIP companies reported making $310 million in capital investments, creating 1,100 jobs and retaining 5,800 jobs in 2010. They claimed $19 million in capital investment tax credits, and $2 million in training tax credits in 2010.

But the audit said the tax credit data under that program might not be reliable.

“For example, companies do not have to report outcome data to receive the tax credit and department staff do not audit or verify self-reported outcome data,” the audit said.

And the audit said that a review of four other economic development programs found that the Department of Commerce did little to enforce reporting requirements, which limited its ability to identify under-performing companies.

Secretary George disagreed with many of the assertions in the audit.

He said the PEAK program had experienced robust growth and some internal processing functions had to be improved. He said the agency “has never done anything the Legislature would not be proud of.”

My gut feeling without any support is that this program hasn't had any oversight and we'll eventually find massive errors and a lack of real economic improvement because of these programs.

I hope I'm wrong, because that would benefit the State. I believe the facts will show that Brownback's programs have had little if any impact, other than enriching the super rich while damning the poor.

What we will never see is just how many of the new jobs would have been created anyway without the program? Unemployment in Kansas has never been as bad as other states during recessions to start with. This idea was just an idea to pad the rich man's pockets with more money courtesy of the poor and middle class who have to make up the difference with higher taxes.

I feel so sorry for the duped poor and middle class republicans in Kansas. Standing by their man is clobbering them.

The Kansas Department of Commerce...handling economic development projects...conceived by the monied interests (Corporations & Financial Industries)...and carried out by the
Government because we the people don't have the cash flow to lobby. Close more schools...

How long will it be before the Legislature or Governor decides to eliminate LPA for not promoting the Republican line. Hats off to LPA for reporting on what they found, despite getting so much criticism from the Legislature.

Geez, this kind of reminds me of what is happening at the federal level ......only with a logrithemic multiplier and under a democratic administration. Forget Brownback or Obama, government is incompetent and, as has been shown at the federal level, corrupt. Smaller and less government!

seems yet again that Liar Sammy's Krew will lie as well -- just a matter of time before Commerce gave away the bank to buddies and then denies it -- liles, lies, liar - -from Sammy to Regent to Commerce to KKris -- wow -- nothing is working but everything is OK. Just don't ask questions.

Funneling millions in public tax dollars to politically connected private companies; crippling the government's inspection system so that it can no longer impose money penalties for contract non-performance; rigging the game by empowering private companies to judge their own contract compliance and quality assurance...this, folks, is the hallmark of Performance-Based Contracting. This type of hands-off contracting, especially when it involves multi-million contracts, is a menace to good government whether the administration using it be Republican or Democrat.

And if you are watching the political ads on TV, Missouri wants to be just like us, because we are supposedly expanding our tax base, while our schools thrive. According to the Missouri conservatives we are rolling in the dough. It would be a laugh, if it wasn't such a huge lie.

It seems that the HPIP program cost the people of Kansas $19,090 for every job created because of it ($19 million + $2 million in tax credits, divided by 1,100 new jobs). Surely there are more cost-effective ways of creating jobs.